With a home equity loan, homeowners of any age receive a sum of money and use their house as collateral to secure the loan. In some cases, regular monthly payments are expected to be paid to the lender. In others, borrowers receive a line of credit that they can borrow against and make payments for, as needed. A borrower's income is considered as a factor in the loan approval process.
To obtain a reverse mortgage, homeowners generally must be age 62 or older. With their home as collateral, borrowers can receive money from the loan (up to a specified amount of the home's value) as a lump sum, in cash installments, as a line of credit, or as a combination of these options. The amount received is based primarily on the borrower's age, the value of the home, and prevailing interest rates. There are no income requirements and no monthly payments because the loan is not repaid until the borrower leaves or sells the home.
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